Advising families in Irvine, Orange County and throughout Southern California on special needs planning as well as the establishment of special needs trusts.
The Law Offices of Michael J. Wittick, P.L.C. has a special love for your special needs child and from considerable experience has also grown to admire the extraordinary service of the parents of such children.
It has been estimated by Social Security and Department of Education and, as recently as 2007, by the U.S. Census Bureau that 20% of Americans have a disability, 12.5% of Americans have a severe disability and 11% of children between the ages of 6 and 14 have a disability.
Thanks to steady advances in medical technology, ours is the world’s first generation when children with disabilities will outlive parents and the first when many of our parents, albeit disabled, make it well into their nineties and over 100 years of age. This massive demographic change has spawned the need for legislative and regulatory changes to address the needs of individuals with disabilities.
Effective planning includes coordinating the public program benefits with private family or other resources. There is no guarantee that public benefits will provide adequate resources or that public agencies will be there to provide acceptable services and advocacy over the lifetimes of disabled individuals. Critical to this coordination is the specials needs trust, a unique planning tool that can substantially enhance the lifestyle of individuals who experience a disability.
A Special Needs Trust (SNT) is a contract drafted specifically so that trust assets are considered not to be “available resources” in calculating the disabled person’s eligibility for need based benefits such as Supplemental Security Income (SSI) and Medi-Cal. In other words, the SNT preserves the public benefits and the trust assets for the child whereas without the trust, the “available” assets are paid to the source of public benefits or disqualify the child from need based benefits. There are many types of Special Needs Trusts which can be categorized into those funded by a third party (such as the parents) and those funded by the disability benefits recipient. However, benefits alone should not be the sole planning objective. The primary objective of a SNT is to enhance the life of a disabled person by providing better care, a better environment, supplemental medical needs, supplemental therapies, leisure and recreational opportunities or other enhancements that the individual does not have the means to meet otherwise. The right distribution standard must be selected. Many trusts are drafted with overly restrictive distribution clauses. Proper planning will focus on achieving as much independence as possible for the disabled beneficiary. The SNT should provide a higher quality of life for the special needs child than otherwise, provide a framework for not only management of the assets but care for the child, allow the parents to express their desires, and protect the assets from creditors and predators.
Mistakes abound in this area of planning. Some parents have unfortunately come to the conclusion that the beneficiary must be disinherited to preserve eligibility for public benefits but this alternative is almost never necessary and only leads to uncertainty about the child’s future. Parents should also be cautioned against hiding assets inherited by persons with disabilities which, although common, is fraudulent when applying for public benefits. Most of all, a Special Needs Trust that is not customized to meet the very specific needs of your special needs child is even more worthless than a “boiler plate” trust for a healthy beneficiary because of the helpless nature of the special needs child. Moreover, incorrect trust drafting can render your child ineligible for essential benefits. Special Needs Trusts usually should not be irrevocable upon formation because benefit laws change as do trustees, care managers and trust advisory committees, all of which are referred to in the next paragraph.
The majority of problems in trust drafting are caused by choosing the wrong trustee or by not creating enough positions in the trust to manage the various duties. For example, we have found it wise to select a “Care Manager” to interact with the special needs child and act as a liaison between the child and the “Trustee”, who manages the trust funds. One can also create a “Trust Advisory Committee” to advise and direct the trustee. Finally a “Trust Protector” can oversee the Trustee and Care Manager from a distance and replace either for any appropriate reason. This cumulative strategy thus provides maximum tender loving care for your child when you are no longer there, even though we are certainly most interested in your own specific desires as to how you wish to care for your special child. We lastly counsel that parents should not rely upon their other children to take care of special needs children because although the other children may know many of the “special needs”, they may not understand public benefits or taxes, be able to invest wisely, identify second rate services or abuse, carry insurance or conform to all fiduciary requirements as trustee. Additionally, after the parents die or when the other children have their own expenses and financial priorities, many other problems, such as divorce, can overwhelm them and prevent them from adequately caring for special needs children, not to mention the incredible burden imposed upon your other children if they were required to take care of your special needs child for the rest of their lives.
So, just like you wouldn’t procrastinate in planning for your minor children, don’t procrastinate in planning for your special needs children who may never be able to compensate for your failure to plan. Don’t fall prey to the unrealistic expectations of continued service programs, remaining family members, or advisors with inadequate experience. You should plan now and create a revocable SNT during your lifetime so that you can update to accommodate changes in your child’s needs or your situation or changes in federal or state law. An additional benefit of a lifetime SNT is that you can and should invite contributions to the trust from extended family and friends. Lastly, you may want to consider life insurance to provide assurance that funds will be available for your special child’s care.
In your consultation, please be prepared to provide:
- Your “Notice of Benefits” to determine the type and amount of each public benefit.
- To what extent are the benefits necessary?
- A filled out Confidential Client Worksheet
- Identify your objectives for the special needs child
- Who presently owns the funds to be contributed to the Trust? Third Party like parents? or the benefits recipient?
- What are the financial and non financial needs of the special needs child?
For additional information, please reference Mr. Wittick’s presentation on Issues in Special Needs Trust Planning. |